UK: Investing Cash lying in an LLC

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bonglehead
Posts: 15
Joined: Thu Mar 15, 2012 7:45 am

UK: Investing Cash lying in an LLC

Post by bonglehead » Sat Jul 15, 2017 2:18 pm

Hello- I am looking for some help for my relative who is settled in UK.
He and his wife both are doctors with NHS and they also have side income from private practice (they have set up an LLC for the private practice). I am not familiar with U.K. Tax laws but I understand that it's not easy to "extract" the cash from the LLC as it gets added to personal income which has >40% tax. He is planning to let the LLC accumulate the cash (roughly 100K GBP/yr) and think about withdrawing the cash in retirement (>20yrs to go)

My question is - Is there any way to invest this cash so that it can earn the market returns? Right now it's just sitting in a bank account earning nothing.
Any pointers to any online resources on this topic will also be very helpful.
Many Thanks.

Valuethinker
Posts: 33144
Joined: Fri May 11, 2007 11:07 am

Re: UK: Investing Cash lying in an LLC

Post by Valuethinker » Sat Jul 15, 2017 5:11 pm

bonglehead wrote:Hello- I am looking for some help for my relative who is settled in UK.
He and his wife both are doctors with NHS and they also have side income from private practice (they have set up an LLC for the private practice). I am not familiar with U.K. Tax laws but I understand that it's not easy to "extract" the cash from the LLC as it gets added to personal income which has >40% tax. He is planning to let the LLC accumulate the cash (roughly 100K GBP/yr) and think about withdrawing the cash in retirement (>20yrs to go)

My question is - Is there any way to invest this cash so that it can earn the market returns? Right now it's just sitting in a bank account earning nothing.
Any pointers to any online resources on this topic will also be very helpful.
Many Thanks.
Best practice is often to use a limited liability partnership structure in which case all income is only taxed once not twice, but at your marginal income tax rate.

If using a limited company you pay corporate tax rate on profits (have to look up what that is, 19 or 20 per cent, not sure what small business rate is now). You then pay yourself dividends which were taxed at 32.5 but now it is 40 above an exempt amount (or 45 if income high enough and note there's a bit between 100 and 120k when it is actually 61 ).

What you can do is wind the company down when you retire and as long as you have genuinely terminated activity in that field, pay a lower tax rate ie treat it as a return of capital. Have to be careful of the rules tax authorities are prone to query anything dodgy looking.

As to investing the hard part will be to find a broker willing to act for a limited company. That could be tricky. But yes then the company can invest and pay taxes on capital gains dividends and interest. This is how people invest in real estate these days. Doesn't escape dual taxation of course.

They should check with their financial adviser and with their bank to see if either would be prepared to act for them in this way. Ie take the company on as a client.

The key though here is tax efficiency. For example the company may be able to create a pension scheme with them as beneficiaries.

All this speaks to having a good accountant. If their accountant is not up to this (and it should be) then pm me and I can make one suggestion (London and south east based).

This is not a Diy situation. You have to get advice right. That fee may in part be chargeable to the company though.

bonglehead
Posts: 15
Joined: Thu Mar 15, 2012 7:45 am

Re: UK: Investing Cash lying in an LLC

Post by bonglehead » Sun Jul 16, 2017 3:35 pm

Thanks Valuethinker- this is very helpful. You seem to know quite a bit more than I do on this topic, will PM you for the accountant reference.

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